USD: Relatively quiet as earnings surge
The S&P 500 has pushed to another record high, its 35th of 2026, helped by an earnings season that keeps clearing already high expectations. Q2 S&P 500 EPS growth is tracking near 33% y/y, roughly triple the historical ex-recession median of 11%. That is already an unusually strong profit backdrop, especially after six prior quarters of double-digit earnings growth. The index has also broken out of its two-month range, though technicals now warn that the rally is getting more stretched.
The revision story is just as important as the headline growth number. Consensus earnings expectations have moved sharply higher through reporting season, rather than fading after companies cleared the initial hurdle. Some broader earnings-season estimates look even stronger once large one-off mega-cap effects are included, but the cleaner takeaway is the same: profits are running well above normal. In plain terms, investors are rewarding beats and being forced to mark up the profit base.
The strength is still concentrated. Semiconductors, mega-cap tech and energy are carrying a large share of overall earnings growth, while defensive sectors are contributing far less. That keeps the rally tied to AI capex, cloud demand, margins and energy profits. It does not weaken the bull case, but it makes guidance more important as the earnings season moves past the heaviest reporting window.
The dollar’s role has been quiet, which is exactly what equities needed. A stable or softer USD helps global earnings translation and keeps financial conditions from tightening too quickly. That backdrop has allowed earnings to dominate, especially while AI spending and consumer demand remain solid. If the dollar strengthens again alongside front-end higher real rates, earnings will need to carry more of the load to keep the S&P 500 breakout intact.
EUR: Cyclical convergence lends euro lifeline, for now
The sharp rebound in the EZ-US economic surprise differential is providing a modest tailwind for the euro, particularly as it coincides with a partial recovery in Eurozone-US rate differentials. However, the rates move has been driven in part by a more hawkish ECB response to higher oil prices following Middle East tensions, rather than a decisive improvement in Eurozone growth fundamentals. As such, the latest moves reflect a cyclical correction in relative expectations rather than the emergence of a structurally bullish euro regime.
EUR/USD has been as high as 1.2080 in early 2026, and as low as 1.1325 in late June. After breaking above former resistance near 1.1450, EUR/USD ran into a key technical barrier comprising both the downtrend line in place since January and the 100‑day moving average near 1.1570. The broader message remains consistent with the narrative that has developed over recent weeks: the recovery looks tactical rather than structural in our view.
GBP: Risk appetite offers sterling support
The pound posted modest gains against the dollar yesterday as oil prices extended their decline, leaving Brent and WTI down around 12% on the week, while global equity markets pushed to fresh record highs. Revived risk appetite reflects growing speculation around a potential US–Iran agreement that could ultimately lead to the reopening of the Strait of Hormuz. For sterling, the combination of lower energy prices and firmer risk sentiment is proving supportive, reinforcing its status as both an energy-sensitive and risk-sensitive currency.
How durable that proves remains to be seen, but for now it’s enough to keep GBP/USD above its key daily moving averages despite a bout of resilient US economic data already this week.
Importantly, the rates channel remains relatively balanced. Both UK gilt yields and US Treasury yields have moved lower alongside oil prices, leaving yield differentials largely unchanged. As a result, GBP/USD is being driven less by interest-rate expectations and more by changes in risk sentiment and the broader energy narrative.
That leaves sterling continuing to rely heavily on external developments. The recent decline in oil prices offers some relief after July’s terms-of-trade headwinds, but with UK yield support becoming less compelling and August seasonality historically unfavourable for the pound, the sustainability of any rally will likely depend on whether improving global sentiment can offset fading domestic support drivers.
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Calendar: August 03-07
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
